Toll Brothers builds and sells luxury homes, including homes buyers personalize before construction and homes available for a faster move-in. In its third fiscal quarter ended July 31, 2026, new communities helped lift net orders 5%, but net profit fell 24% as the company delivered fewer homes and offered larger incentives on homes started before finding a buyer. Expansion is bringing in business, while requiring more money and producing less profit from each dollar of home sales.
Research cutoff: October 20, 2026, New York date. Financial results run through July 31; the later evidence discussed below includes September company announcements and mortgage-rate data through October 15.
1. More communities brought orders, but the average sales pace slowed
Toll’s order growth came mainly from opening more places to sell homes. It ended July with 471 selling communities, up from 420 a year earlier. Net contracts increased more slowly, and management reported an approximately 5% decline in contracts per community. Customers were still buying, but each location was, on average, attracting fewer signed purchases.
A contract is an agreement to buy a home. Toll generally records the sale as revenue only when it hands the home and its title to the buyer. Orders therefore describe future business; deliveries explain current home-sales revenue. Net contracts deduct cancellations, including cancellations of agreements signed in earlier periods.
| Operating measure | Third quarter FY2025 / July 31, 2025 | Third quarter FY2026 / July 31, 2026 |
|---|---|---|
| Selling communities at quarter-end | 420 | 471 |
| Net contracts signed during the quarter, homes | 2,388 | 2,508 |
| Homes under contract but not delivered at quarter-end | 5,492 | 5,312 |
| Value of those undelivered contracts, $ million | 6,376.2 | 6,238.5 |
The order book, or backlog, remained smaller than a year earlier. That partly reflects Toll’s increased use of speculative homes—homes it starts before finding a buyer. These homes can be sold and delivered within the same quarter, so they may never appear in a quarter-end backlog. A smaller backlog alone therefore does not measure the whole change in demand.
The more direct evidence is mixed: total orders increased, but sales per community weakened. The company also began fiscal 2026 with 4,647 homes in backlog, compared with 5,996 a year earlier. That smaller starting pool helped explain the subsequent delivery decline. Faster construction partly offset it, but could not replace all the missing deliveries.
Sources: Toll Brothers FY2026 third-quarter Form 10-Q, Note 1, pp. 7–8, and MD&A, pp. 29–34. The per-community decline is management’s disclosed comparison, not a calculation using only quarter-end community counts.
2. Fewer deliveries and larger incentives reduced homebuilding profit
The profit decline was rooted in homebuilding, even before apartment investments are considered. Toll delivered 2,662 homes in the quarter, down from 2,959. Its average delivered price rose to $996,400 from $973,600 because the mix included more expensive homes, particularly in the Pacific and Mid-Atlantic regions. The average price therefore reflects which homes customers bought, as well as the prices charged.
Home-sales revenue fell 7.9%. At the same time, incentives on speculative homes reduced the amount Toll retained from each sale. Such incentives are deducted from revenue when the home is delivered. Home-sales gross margin—the share of revenue left after the recorded cost of the homes—fell from 25.6% to 23.9%.
Opening more communities also increased payroll, commissions and sales-center costs. Selling, general and administrative expense rose 4.9% to $266.1 million despite lower revenue. These expenses absorbed 10.0% of home-sales revenue, compared with 8.8% a year earlier. The company was paying for a larger selling network while completing fewer sales.
| Consolidated results, $ million except margins and EPS | Third quarter FY2025 | Third quarter FY2026 | First nine months FY2025 | First nine months FY2026 |
|---|---|---|---|---|
| Home-sales revenue | 2,881.0 | 2,652.5 | 7,428.2 | 7,019.9 |
| Total revenue | 2,945.1 | 2,658.8 | 7,543.3 | 7,335.6 |
| Operating profit | 487.7 | 359.2 | 1,156.5 | 924.8 |
| Operating margin on total revenue | 16.6% | 13.5% | 15.3% | 12.6% |
| Net profit | 369.6 | 280.1 | 899.8 | 751.7 |
| Net margin on total revenue | 12.6% | 10.5% | 11.9% | 10.2% |
| Diluted earnings per share, $ | 3.73 | 2.97 | 8.95 | 7.87 |
Source: FY2026 third-quarter Form 10-Q, consolidated income statement, p. 3; MD&A, pp. 30–33. Margins on total revenue are calculated from unrounded reported amounts. Quarter and nine-month results are separate comparisons.
The regional results locate the weakness. The South and Mountain regions together accounted for about 72% of the consolidated operating-profit decline. Both delivered fewer homes and earned lower home-sales margins. The South’s stronger Florida orders and the Mountain region’s improving demand offer a possible route to recovery, but those orders had not yet repaired current earnings.
The Pacific region shows why average prices need care. Its home-sales revenue was roughly unchanged even though deliveries fell 11%, because the average delivered home was 14% more expensive. Meanwhile, its net contracted homes fell 5%. Selling a more expensive mix supported current revenue without establishing stronger demand across the region.
Source: FY2026 third-quarter Form 10-Q, Note 15, p. 24, and regional MD&A, pp. 43–45. The 72% contribution uses reported segment operating profit and includes the corporate reconciliation in the consolidated denominator.
The same-quarter history shows a longer margin decline. Third-quarter reported home-sales gross margin was 27.4% in fiscal 2024, 25.6% in fiscal 2025 and 23.9% in fiscal 2026. Inventory write-downs reduce the recorded value of land or homes. Management’s adjusted margin removes these charges and interest. Even on that basis, the margin fell from 27.5% in fiscal 2025 to 25.6% in fiscal 2026. The adjustment does not change the business finding: Toll is earning less gross profit per dollar of home sales. The exact reported-to-adjusted calculation appears in the notes below.
Sources: FY2025 third-quarter results, consolidated income statement and gross-margin reconciliation; FY2026 third-quarter Form 10-Q, pp. 3 and 9–10; FY2026 third-quarter results, non-GAAP reconciliation.
Share repurchases softened the decline in earnings per share. Quarterly diluted shares, including the potential effect of employee awards, averaged 94.445 million, down 4.8% from 99.170 million. Net profit fell 24.2%, while reported diluted EPS fell 20.4%. The lower share count spread the remaining profit over fewer shares; it did not improve operating earnings. A lower effective tax rate, 25.3% versus 26.0%, also provided some support, principally through higher excess tax benefits from share-based compensation.
Source: FY2026 third-quarter Form 10-Q, Notes 8 and 11, pp. 16 and 19, and MD&A, p. 33.
3. Luxury buyers provide support, but higher mortgage rates still matter
Toll has evidence of customer financial strength, alongside clear pressure on selling terms. Management said on August 19 that one-quarter of third-quarter buyers paid cash. Financed purchases averaged a 69% loan-to-value ratio, meaning buyers financed about two-thirds of the home’s value.
Management’s response is to sell speculative homes earlier in construction, when buyers can still personalize them. Completed unsold homes fell from 2.8 per community at the fiscal-year start to 1.9 in July. Incentives on newly signed contracts averaged 7.5% of gross selling price, down from about 8% over the preceding year. These are encouraging signs, although incentives on new contracts and margins on homes already delivered measure different stages of the sale.
Source: August 19, 2026 earnings-call transcript, p. 5. These are management’s operating measures.
The strategy serves two needs. A home already under construction can attract a buyer who cannot wait for a fully customized house. Selling it earlier also reduces the period Toll must finance an unsold completed home. Yet the filing says speculative homes generally have lower gross margins than build-to-order homes. The benefit from faster completion must therefore be weighed against the profit given up to make the sale.
Source: FY2026 third-quarter Form 10-Q, “Our Business Environment and Current Outlook,” p. 31.
A competitor’s later results reinforce the distinction between selling more homes and protecting profit. For its quarter ended August 31, Lennar reported a $372,000 average delivered price and a 9% decline in new orders. Management described using incentives and price adjustments to sustain volume and keep construction efficient. Lennar serves a much lower average price point than Toll, so this is evidence of wider competitive pressure, not a like-for-like test of their margins.
Source: Lennar’s September 16, 2026 results, management commentary and homebuilding results for the quarter ended August 31, 2026.
The financing environment became harder after Toll’s quarter closed. Freddie Mac’s average 30-year fixed mortgage rate rose from 6.66% on July 30 to 7.40% on October 15, an increase of 0.74 percentage points. This national benchmark is not the rate paid by every Toll customer. It nevertheless raises the cost of borrowing for prospective buyers and can make incentive reductions harder to sustain. Toll’s affluent customer base offers protection, but the company’s own slower sales per community shows that protection is incomplete.
Source: Freddie Mac’s 2026 mortgage-rate archive, July 30 and October 15 observations. The implications for Toll are an assessment, not a reported post-July change in its orders.
4. The apartment exit releases capital, while losses and guarantees remain
Selling the apartment business has brought in cash, but has not ended Toll’s exposure to rental property. Management’s stated purpose was to release capital and focus on its core homebuilding business. The sale of roughly half the Apartment Living portfolio and its operating platform to Kennedy Wilson was substantially completed in the first quarter of fiscal 2026, producing approximately $330 million of net cash proceeds.
The transaction also removed assets and obligations previously grouped as held for sale. Those year-end balance-sheet categories contained $421.0 million of assets and $172.2 million of liabilities; both were zero at July 31. The sold business remained within continuing operations for accounting purposes, so the year-to-year income statements include its effects.
Sources: September 18, 2025 transaction announcement, management’s stated purpose; FY2026 third-quarter Form 10-Q, Note 1, p. 8, for actual completion, proceeds and accounting treatment.
Toll owns some property businesses with partners through joint ventures. Sales gains and write-downs in these businesses need to be read together. In the third quarter, Toll’s $38.4 million of gains from two rental joint-venture transactions was slightly more than offset by $39.6 million of write-downs on other rental investments. The write-downs mean Toll no longer expected to recover the full recorded value of several investments. Its valuations considered prospective sale terms and broker opinions where applicable.
| Toll’s share of joint-venture results, pretax $ million | Third quarter FY2025 | Third quarter FY2026 | First nine months FY2025 | First nine months FY2026 |
|---|---|---|---|---|
| Gains on sales of ownership interests | 0.0 | 3.1 | 2.7 | 72.1 |
| Gains from property sales inside rental ventures | 0.0 | 35.3 | 18.2 | 56.7 |
| Write-downs of rental-venture investments | 0.0 | -39.6 | 0.0 | -97.4 |
| Total reported joint-venture income or loss, including other results | -1.0 | -3.1 | 1.7 | 15.6 |
The first three rows isolate disclosed transactions; other venture results explain the difference from the total. The table uses only Toll’s recognized share of the ventures’ results. These amounts are before tax; they are not presented as an adjustment to net profit.
Source: FY2026 third-quarter Form 10-Q, Note 4, p. 12; Note 12, p. 20; and consolidated income statement, p. 3.
The broader disposal also affected ordinary-looking revenue lines. During the first nine months, Apartment Living property and land sales contributed $284.1 million of revenue and $265.3 million of cost, producing an $18.8 million pretax gain. That helps explain why total revenue fell less than home-sales revenue. Ancillary-business income included $10 million of previously deferred management fees released by the apartment sale and a separate $3.9 million gain from selling security-monitoring accounts. These benefits should not be treated as evidence that recurring homebuilding profit improved.
Source: FY2026 third-quarter Form 10-Q, Notes 13 and 15, pp. 21 and 26, and MD&A, p. 32.
Total venture investments fell $118.8 million from fiscal year-end to $907.1 million, led by a shrinking rental portfolio while land-development investments increased. Toll still carried $296.3 million of rental-venture investments at July 31.
For its remaining land, homebuilding and rental ventures, Toll estimated maximum repayment and carrying-cost guarantees of $388.9 million. These promises can require Toll to cover a venture’s debt or costs such as interest and property taxes. A further $122.5 million of such exposure remained on interests already sold; Kennedy Wilson had agreed to reimburse Toll if those guarantees were called. These maximum exposures are potential funding requirements, not reported cash payments. Recovery depends on collateral and counterparties, and the estimates exclude completion guarantees and certain indemnities whose possible cost was not estimable. The exit reduces the business’s capital needs over time, but final cash recovery still depends on selling retained assets and releasing guarantees.
Source: FY2026 third-quarter Form 10-Q, Note 4, pp. 10–13. The October 2025 venture-investment balance excludes interests separately classified as held for sale.
5. Community expansion kept money tied up in land and construction
Inventory growth absorbed most of the cash that profit and noncash adjustments initially generated. Toll spent on land, development and homes before collecting the full selling price from buyers. Its inventory rose 9.1% from fiscal year-end, reaching $11.65 billion, or about 79% of total assets.
The largest increase was in land and land development, rather than the physical construction of houses alone. Model homes also grew as Toll expanded its selling network. The May acquisition of Buffington Homes of Arkansas also added nine active or upcoming communities and approximately 1,500 owned or controlled home sites. Toll classified the purchase as an asset acquisition and said its overall financial effect was not material.
| Inventory at recorded cost, $ million | October 31, 2025 | July 31, 2026 | Increase |
|---|---|---|---|
| Land, deposits and land-development costs | 7,600.0 | 8,312.0 | 712.0 |
| Homes under construction, excluding the land above | 2,535.2 | 2,686.7 | 151.5 |
| Model homes, including their allocated land costs | 543.3 | 646.8 | 103.5 |
| Total inventory | 10,678.5 | 11,645.6 | 967.1 |
Source: FY2026 third-quarter Form 10-Q, Notes 2 and 3, p. 9. Changes are calculated from unrounded amounts; displayed components may differ from the displayed total by rounding.
Options give Toll some control over how quickly it commits more cash. About 58% of its roughly 75,500 controlled home sites were optioned rather than owned. Most land agreements do not force a purchase, although walking away can mean losing deposits and development spending. The contracts called for another $7.29 billion if completed, in addition to $872.4 million already deposited. This is a pipeline of possible purchases, not a single near-term debt payment.
There are limits to that flexibility. Toll had already recorded $847.7 million of the additional purchase amount as a liability. Its total liabilities for inventory not yet legally owned rose from $754.8 million to $856.9 million, explaining most of the increase in accrued expenses. Toll also recorded $29.6 million of nine-month write-offs on land controlled for future communities. Options reduce the amount invested upfront, but do not eliminate losses when plans change. Separately, Toll had $269.0 million of remaining funding commitments to joint ventures, mostly land-development ventures.
Source: FY2026 third-quarter Form 10-Q, Notes 3, 4, 7 and 14, pp. 9–10, 16 and 22, and MD&A, p. 34. Land contracts and venture funding have different scopes and are not added into a single immediate cash requirement.
For the first nine months, reported operating cash flow rose to $392.1 million from $312.4 million despite lower profit. The improvement did not come from spending much less on inventory: inventory absorbed approximately $900 million in both periods. Instead, the largest favorable change was the combined movement in receivables, prepaid expenses and other assets, a line that explicitly includes rental and commercial properties. Mortgage-loan sales and customer deposits also supplied more cash.
| Reconciliation from profit to operating cash, $ million | First nine months FY2025 | First nine months FY2026 |
|---|---|---|
| Net profit | 899.8 | 751.7 |
| Noncash adjustments and venture earnings distributions, net | 184.7 | 198.2 |
| Inventory cash use | -902.8 | -900.4 |
| Mortgage loans sold less loans originated | 8.0 | 69.4 |
| Receivables and other assets, including rental and commercial properties | -12.2 | 262.5 |
| Taxes, customer deposits, supplier bills and accrued expenses, net | 134.9 | 10.7 |
| Operating cash flow | 312.4 | 392.1 |
The property-related cash movement matters because Toll was disposing of Apartment Living assets. The $262.5 million inflow combines property activity with other asset movements; it does not isolate collections from homebuyers. The increase in operating cash therefore gives an incomplete picture of cash generated by ongoing homebuilding.
Customer deposits helped because buyers supplied more money before delivery. Conversely, supplier bills and accrued expenses used $2.3 million of cash, compared with providing $115.0 million a year earlier. Toll received much less cash-flow support from the timing of those obligations. Those changes help explain why cash and profit moved differently.
Source: FY2026 third-quarter Form 10-Q, cash-flow statement, p. 6; Notes 1 and 16, pp. 8 and 28; MD&A, pp. 36–37. Grouped rows are reconciled in the calculation notes.
Using operating cash flow less net purchases of property, construction and office equipment, calculated free cash flow was $318.0 million, up from $254.0 million. Land and home-construction cash spending is already included in operating cash flow and must not be deducted a second time. It retains the property-related effects discussed above.
Other assets were much smaller uses of capital. Net property and equipment rose $20.3 million to $293.6 million, while receivables, prepayments and other assets fell $16.0 million to $538.7 million. That balance includes leased-property rights and insurance recoveries as well as receivables. The filing does not provide a maintenance-versus-growth split for equipment spending.
Source: FY2026 third-quarter Form 10-Q, balance sheet, p. 2; cash-flow statement, p. 6; Note 5, p. 14. Free cash flow uses the statement’s net equipment-purchase line of $74.031 million in FY2026 and $58.363 million in FY2025.
6. Liquidity supports the plan, although shareholder payments exceeded free cash flow
Toll has substantial funding capacity, but expansion and shareholder payments are drawing on more than current free cash flow. In the first nine months, cash purchases of treasury shares and excise-tax payments totaled $434.9 million, and paid dividends were $73.5 million. Together they exceeded the $318.0 million free-cash-flow measure by $190.4 million.
Asset sales and venture distributions helped meet the wider cash needs. Investing activities supplied a net $116.3 million, compared with using $240.2 million a year earlier. The current period included $219.5 million from sales of venture interests and $104.2 million returned from venture investments, against $129.1 million of new venture funding and $74.0 million of net equipment purchases. Net loan repayments used another $182.1 million. After all operating, investing and financing flows, cash including restricted cash fell $208.7 million.
Available funding remained substantial. At July 31 it had $1.058 billion of cash and cash equivalents, plus approximately $2.24 billion available under its revolving credit facility, with no revolver borrowings outstanding. Restricted cash is excluded from that cash balance. The company extended the revolver to February 2031 and most of its $650 million term loan to the same month.
Source: FY2026 third-quarter Form 10-Q, pp. 2 and 6; Note 6, pp. 14–15; MD&A, pp. 34–37. Cash share purchases include the cash-flow statement’s excise-tax payment; they differ from the equity statement’s booked repurchases.
The next major bond payment is $450 million in March 2027. Later bond maturities are spread out, which gives Toll time to collect sales proceeds or arrange financing. The mortgage subsidiary’s separate borrowing facility expires sooner, on November 25, 2026. It had $128.9 million outstanding against $130.7 million of mortgage loans held for sale. Those loans are normally sold to outside institutions; this financing should be distinguished from debt supporting long-lived land holdings.
| Outstanding senior bonds, principal in $ million | Contractual maturity | Contractual annual interest rate | Calculated annual cash interest, $ million |
|---|---|---|---|
| 450.0 | March 15, 2027 | 4.875% | 21.94 |
| 400.0 | February 15, 2028 | 4.350% | 17.40 |
| 400.0 | November 1, 2029 | 3.800% | 15.20 |
| 500.0 | June 15, 2035 | 5.600% | 28.00 |
Sources: FY2025 Form 10-K, Note 5, pp. F-25–F-27, for bond terms; FY2026 third-quarter Form 10-Q, Note 6, pp. 14–15, and MD&A, p. 35, confirming four outstanding issues totaling $1.75 billion and the next maturity. The November 2029 payment falls in Toll’s fiscal 2030.
The bonds require about $82.5 million of annual interest while all remain outstanding. Other borrowing adds to that cost. The term loan carried a 4.54% variable rate at July 31; $101.6 million matures in February 2030 and $548.4 million in February 2031. Toll estimated that a one-percentage-point increase in rates on all its variable debt would add about $8.2 million of annual interest, assuming unchanged balances.
Borrowing costs can reach the income statement later than the cash obligation arises. Toll adds qualifying interest to the cost of developing inventory, then recognizes it as homes are sold. During the first nine months, it incurred $89.3 million of interest in the inventory-interest schedule and recognized $75.2 million in home-sales costs. The $203.1 million of interest remaining in inventory will affect future reported costs as the related assets are sold. Removing interest from an adjusted margin does not remove the financing cost from the business.
Source: FY2026 third-quarter Form 10-Q, Notes 3 and 6, pp. 10 and 14–15; market-risk disclosure, p. 47.
Toll reported compliance with its borrowing rules, which limit debt relative to its financial resources and require a minimum equity balance after specified adjustments. Lease liabilities were an additional $147.3 million, up from $128.3 million at fiscal year-end. They are included in accrued expenses rather than the financing-debt totals. The October 2025 lease schedule, excluding leases classified with assets held for sale, showed $25.4 million due during fiscal 2026; it predates subsequent lease changes and is not a current July maturity schedule.
The net assets belonging to Toll’s shareholders—reported as stockholders’ equity—rose to $8.531 billion from $8.271 billion. Retained profit more than covered the net reductions from repurchases and other equity movements. Toll repurchased 2.955 million shares while issuing 0.526 million shares through employee plans. Employee plans reissued shares the company already held, while repurchases brought shares back from shareholders. The net reduction in shares outstanding was 2.429 million. Stock compensation of $27.7 million remained a real employee cost even though it was added back when reconciling profit to operating cash.
Sources: FY2026 third-quarter Form 10-Q, pp. 2 and 5, Notes 6–11, pp. 14–19; FY2025 Form 10-K, Note 13, pp. F-39–F-40, for the dated lease schedule. The equity reconciliation is provided below.
Past deliveries also carry continuing costs. Toll’s warranty liability rose to $255.5 million from $248.4 million, including $7.6 million of additional provisions for homes delivered in earlier years. Self-insurance liabilities increased to $257.5 million from $237.4 million, while expected insurance and other recoveries were $125.0 million. These balances are not interchangeable offsets: claims can arise years after construction, and recoveries depend on the relevant coverage and counterparty.
The litigation note says management believes current provisions are adequate and does not expect a material adverse effect. It provides no quantified additional-loss range. Unrecognized tax benefits, including interest and penalties, totaled $25.7 million; Toll said the balance could change over the next year but did not estimate a range. These exposures do not overturn the liquidity assessment, but they explain why accounting equity and available cash cannot be treated as wholly free for distribution.
Sources: FY2026 third-quarter Form 10-Q, Notes 5, 7, 8 and 14, pp. 14, 16 and 21; FY2025 Form 10-K, Note 1, “Warranty and Self-Insurance,” pp. F-13–F-14.
7. The next test is converting the larger selling network into cash without deeper discounts
Toll can finance its expansion, but a profit recovery depends on delivery execution and selling terms. In August, management projected 3,450–3,550 fourth-quarter deliveries, an average delivered price of $995,000–$1,005,000 and a 26.0% adjusted home-sales gross margin. Those are forecasts issued before the later rise in mortgage rates. The company did not provide a corresponding GAAP gross-margin forecast because future inventory write-downs could not be estimated reliably.
Source: August 18, 2026 results and guidance, fourth-quarter guidance and forward-looking non-GAAP explanation.
Management said about 2,700 of the 3,500 deliveries at its forecast midpoint would come from backlog. About 800 homes still needed to be sold and closed within the quarter. Approximately 900 finished speculative homes, plus nearly 1,000 at a sufficiently advanced construction stage, supported that plan. Thus, construction availability was substantial, but the final portion still required buyers to commit and close on time.
Source: August 19 earnings-call transcript, p. 7. These quantities describe management’s August plan, not completed fourth-quarter sales.
At the midpoint, deliveries would rise about 31% from the third quarter. More completed sales would spread selling and administrative costs over more revenue, while recovering cash already invested in homes. The sensitivity is meaningful: on an illustrative $3.5 billion of home-sales revenue, a one-percentage-point difference in gross margin changes gross profit by $35 million before changes in other expenses and tax. This is a business sensitivity, not a forecast of the final result.
Management also increased its planned fiscal-year repurchases to $700 million. A September 16 announcement declared another $0.26-per-share dividend, payable October 23; that payment was still ahead of the research cutoff. These decisions show continued commitment to shareholder payments alongside expansion, making cash recovered from deliveries and asset sales especially relevant.
Sources: August 18 results, repurchase plan; September 16 dividend announcement, declaration and payment date. The margin sensitivity is calculated using the delivery and price midpoints above.
The overall business remains profitable and well funded, with a broader selling network and a deliberate move away from apartment development. Its weakness is that expansion has yet to restore sales productivity or margins: more money is tied up in inventory while each dollar of home sales earns less gross profit. Earlier speculative-home sales and a successful fourth-quarter delivery ramp would improve that balance. Persistently slower sales per community or renewed incentive increases would instead keep capital committed for longer and limit the profit benefit from new communities.
Reporting basis and calculation notes
Reporting basis: Toll Brothers, Inc., ticker TOL, CIK 0000794170; consolidated U.S. GAAP Form 10-Q for July 31, 2026, filed August 28, 2026; accession 0000794170-26-000102. Fiscal 2026 ends October 31, 2026. The quarter covers May 1–July 31; the cumulative period covers November 1, 2025–July 31, 2026. Comparisons use the corresponding fiscal 2025 periods, and balance-sheet changes use October 31, 2025. Majority-owned subsidiaries are consolidated and intercompany amounts eliminated; other ventures follow the filing’s control and equity-accounting policies. The separate guarantor-only financial information is not used as the company’s consolidated result.
Sources: SEC filing index; Form 10-Q, cover and Note 1; SEC company facts. Selected reported totals were cross-checked using this accession’s USD facts with the matching instant, quarterly or nine-month dates. Amounts below are in $ million unless stated otherwise.
Calculation notes: Growth equals the current amount divided by the comparable prior amount, less one. Percentage-point changes subtract the percentages. Calculations use the filing’s amounts in thousands before conversion and rounding. The research incorporates the dated sources identified beside each claim; it does not treat the October 20 cutoff as proof that every company development through that date has been verified.
A. Removing interest and write-downs still leaves lower margins
Management’s adjusted gross profit adds back two costs to reported home-sales gross profit. It is a pretax measure before selling and administrative expense, not adjusted net income. Incentives remain reflected in revenue.
| Gross-profit reconciliation, $ million except percentages | Third quarter FY2025 | Third quarter FY2026 | First nine months FY2025 | First nine months FY2026 |
|---|---|---|---|---|
| Reported home-sales gross profit | 738.207 | 634.903 | 1,901.738 | 1,693.728 |
| Add back interest in home-sales costs | 30.163 | 27.748 | 80.550 | 75.244 |
| Add back inventory write-downs in home-sales costs | 23.315 | 17.657 | 49.531 | 61.808 |
| Adjusted home-sales gross profit | 791.685 | 680.308 | 2,031.819 | 1,830.780 |
| Home-sales revenue used as the denominator | 2,880.975 | 2,652.476 | 7,428.204 | 7,019.925 |
| Reported home-sales gross margin | 25.6% | 23.9% | 25.6% | 24.1% |
| Adjusted home-sales gross margin | 27.5% | 25.6% | 27.4% | 26.1% |
The following calculation shows how the three main changes reduced operating profit. It starts with the comparable prior-year quarter, so it does not mix annual and quarterly results.
| Quarterly operating-profit bridge, $ million | Amount |
|---|---|
| Third quarter FY2025 operating profit | 487.719 |
| Lower home-sales gross profit | -103.304 |
| Lower land-sales and other gross profit | -12.868 |
| Higher selling and administrative costs | -12.396 |
| Third quarter FY2026 operating profit | 359.151 |
The South’s $48.523 million and Mountain’s $44.331 million declines together account for 72.2% of the $128.568 million consolidated decrease.
Sources: Form 10-Q, pp. 3, 9–10 and 24; August 18 results, gross-margin reconciliation.
B. The cash bridge includes property activity and avoids double-counting
Profit includes expenses that did not require current cash payments and venture income that was not necessarily paid to Toll. The cash statement removes those amounts and adds actual cash distributions. This explains the grouped adjustment in Section 5.
| Adjustments to profit, $ million | First nine months FY2025 | First nine months FY2026 |
|---|---|---|
| Depreciation and amortization: allocation of earlier asset costs | 60.277 | 54.427 |
| Employee share compensation | 27.110 | 27.704 |
| Remove recorded joint-venture income | -1.734 | -15.637 |
| Add cash distributions of venture earnings | 26.312 | 49.437 |
| Deferred tax expense: tax expense recognized at a different time from payment | 15.510 | 6.050 |
| Impairments and write-offs: reductions in recorded asset values | 56.634 | 75.622 |
| Other adjustments | 0.549 | 0.555 |
| Total adjustment | 184.658 | 198.158 |
Rental-venture write-downs are already reflected through the venture-income adjustment. Adding them again would count the same effect twice. The other grouped cash-flow row checks payment timing:
| Cash effects of taxes and operating obligations, $ million | First nine months FY2025 | First nine months FY2026 |
|---|---|---|
| Current taxes | 28.971 | -20.605 |
| Customer deposits | -9.078 | 33.669 |
| Supplier bills and accrued expenses | 114.986 | -2.323 |
| Combined cash effect | 134.879 | 10.741 |
Free cash flow is $392.060 million operating cash less $74.031 million net equipment purchases, or $318.029 million. The prior calculation is $312.381 million less $58.363 million, or $254.018 million. FY2026 cash repurchases and excise tax of $434.921 million plus paid dividends of $73.521 million total $508.442 million, exceeding this free cash flow by $190.413 million.
The complete cash movement reconciles: opening cash, equivalents and restricted cash of $1,338.938 million, plus $392.060 million from operations, plus $116.311 million from investing, less $717.067 million from financing, equals $1,130.242 million. Closing cash consists of $1,057.889 million of cash and equivalents plus $72.353 million of restricted cash. The separately reported $112.169 million of customer deposits held in escrow is not added to this cash-flow total.
Source: Form 10-Q, pp. 2 and 6, and Note 16, p. 28.
C. Equity grew after repurchases, and both balance sheets reconcile
Retained earnings are accumulated profits less dividends. Treasury stock is the cost of shares Toll has bought back and still holds. Additional paid-in capital includes equity compensation and effects of employee share transactions. Other comprehensive income holds specified gains and losses recognized outside current net profit.
| Equity account, $ million | October 31, 2025 | Net movement | July 31, 2026 |
|---|---|---|---|
| Common stock | 1.029 | 0.000 | 1.029 |
| Additional paid-in capital | 687.123 | -43.221 | 643.902 |
| Retained earnings | 8,574.807 | 678.265 | 9,253.072 |
| Treasury stock, a deduction | -1,014.568 | -369.664 | -1,384.232 |
| Accumulated other comprehensive income | 22.272 | -5.273 | 16.999 |
| Toll stockholders’ equity | 8,270.663 | 260.107 | 8,530.770 |
| Outside owners’ interests in consolidated entities | 15.401 | -4.630 | 10.771 |
| Total consolidated equity | 8,286.064 | 255.477 | 8,541.541 |
Retained earnings increased by $751.668 million of profit less $73.403 million of declared dividends. Paid-in capital fell by $70.925 million from employee share transactions, partly offset by $27.704 million of share compensation. Treasury stock reflects $432.628 million of booked purchases less $62.964 million released through employee plans. Cash purchases and excise-tax payments differ from booked purchases, just as paid dividends differ slightly from declared dividends.
Other comprehensive income fell by $5.767 million as previously recorded derivative gains moved into earnings, partly offset by $0.494 million related to retirement plans, both after tax. This is different from a fresh operating cash outflow. Issued shares remained 102.937 million; treasury shares rose from 8.140 million to 10.569 million, leaving 92.368 million outstanding at July 31. These point-in-time shares differ from the weighted-average shares used for EPS.
The accounting equation holds: July assets of $14,685.796 million equal liabilities of $6,144.255 million plus total equity of $8,541.541 million. At October 31, assets of $14,519.866 million equal liabilities of $6,233.802 million plus equity of $8,286.064 million.
Financing debt at carrying value was $2,765.476 million in July, comprising loans payable, senior notes and the mortgage facility. The comparable October amount was $2,902.167 million, including $114.254 million of loans classified with assets held for sale. Customer deposits, supplier liabilities, leases and land-purchase accruals are separate obligations; excluding them from financing debt does not remove their cash requirements.
Source: Form 10-Q, pp. 2 and 5; Notes 1 and 7–11, pp. 8 and 16–19. Annual bond interest in Section 6 equals each principal amount multiplied by its contractual interest rate; they exclude other loans, fees and principal repayments.
This analysis is for informational purposes and is not investment advice.